Why Norway should prioritize extended country-by-country reporting

 

Knut Falk Qvigstad (MDG) explains why the weaknesses in OECD´s BEPS-track will allow companies to continue the same practices as they have been doing.

Knut Falk Qvigstad´s input on the interpellation points out that the companies can continue as they did before with OECD´s BEPS-initiative (also called CBCR to the tax authorities).  Even if OECD´s BEPS information is published, the information will be based on the same weaknesses. Parliament therefore should introduce the requirements in extended country-by-country reporting which does not have such weaknesses and which can attain the necessary transparency.

Read the input from Knut Falk Qvigstad (MDG), member of Energy - and the Environmental Committee, and the Committee on Scrutiny and Constitutional Affairs.

Knut Falk Qvigstad (MDG) [17:38:56]:

The Panama Papers have exposed to the whole world how multinational companies that do not wish to pay taxes, can arrange that through tax havens and transfer untaxed income out of countries where the incomes are generated, to countries that impose less or no taxation.

The counter-measure against this is more financial transparency. It is difficult to maintain a practice that cannot stand the light of day when that practice has to be reported.

The current country-by-country reporting regulations don´t function as intended and cannot make apparent unwanted tax adjustments, since there is no transparency in tax havens or costs, and the companies´revised accounting numbers are not used.

Extended country-by-country reporting is a prerequisite for accurate and transparent taxation of companies. The basis for all taxation is information.

An extended country-by-country reporting is based on real accounting numbers, it encompasses all countries, it makes costs transparent, provides timely information, and can be quality checked across countries or companies, it can easily be set up in notes for the annual accounts, it can make transparent unwanted tax adjustments, and there are no exceptions or possibilities of manipulation.

This is the initiative that Norway should strive for. It will entail a change in the accounting law §3-3d, Reporting on payments to authorities etc., so that we can get in place the requirements in extended country-by-country reporting. In addition to the reporting being applied to all countries, there must be a requirement that only accounting numbers should be reported, and nothing else.

OECD´s suggested BEPS initiative to restrain multinational companies from moving their surplus away from taxation in the countries in which they operate, is not adequate to make transparent unwanted tax adjustments.  Weaknesses with this scheme are among other:

  • it is not based on real accounting numbers
  • it does not encompass all countries
  • it does not make all costs transparent
  • it does not give timely information
  • it cannot be quality checked across countries or companies
  • it is not easy to set up notes in the annual accounts
  • it is not public, and
  • there are substantial exceptions and possibilities of manipulation.

To sum it up; we are concerned that BEPS reporting does not adequately contain the requirements that will give the necessary clarity and insight to make unwanted tax adjustments transparent.

These types of weaknesses and avoidance possibilities do not exist in extended country-by-country reporting.

By introducing extended country-by-country reporting, Norway could be a pioneering country in transparency and sustainable development. As I understand it, everybody in this hall can agree that is what Norway ought to be.

My challenge to the Minister of Finance is therefore that the government must follow up Parliament´s objective of extended country-by-country reporting and make transparent unwanted tax adjustments by suggesting changes in the accounting law in follow up.

 

Read more about when hearing on extended country-by-country reporting is coming this summer.

Read more about differences between OECD's BEPS proposal (called "country by country reporting for tax purposes" by Ministry of Finance) and Parliament's request to strengthen the "country by country reporting" with extended country-by-country reporting.